The 66-year-old Portuguese joined the club on an 18-month deal in Nov. 2010 and has guided them to successive second-place finishes against a backdrop of financial problems.
"To stay at Panathinaikos is an act which demonstrates my great love for the club and proves my willingness to help in building a new project," Ferreira said in a club statement on Tuesday.
"As everybody undoubtedly understands, particularly in these difficult times that the club is experiencing, it is not money that is important. I know the risks and difficulties that I am undertaking but I want to stand by Panathinaikos."
Ferreira, however, will be unable to call on the services of key forward Sebastian Leto for the start of the new season with the Argentine ruled out for up to six months after he undergoes knee surgery on Thursday.
Leto scored 15 goals in 17 league matches last season.
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